SAN FRANCISCO — Major players in the adult-entertainment industry, long in the vanguard of technology use, now find themselves playing catch-up.
Overall sales and rentals of X-rated DVDs have plunged 15% in the last year and up to 30% over the past two years because video and photos on the Internet — much of it created by amateurs — are available at a fraction of the cost or for free. PornoTube.com and YouPorn.com are piping user-generated naughty content straight to the PCs, cellphones and Internet-connected TVs of consumers. Internet-based porn sales, by contrast, grew 14%, to $2.8 billion, last year.
The exodus to porn viewing online has been accelerated by more broadband users shunning DVDs and pay-per-view TV in favor of PC screens, says Dennis McAlpine, managing director of media researcher McAlpine Associates. Changes in viewing habits have forced industry heavyweights to dramatically alter how they deliver content, he says.
Vivid Entertainment Group, Hustler and Extreme Associates are rushing to offer movies on the Internet before they are available on DVD. Vivid is set to release its first video-only movie in July. And retailers in the shrinking $3.6 billion DVD market, such as HotMovies.com, are beginning to sell video downloads.
Hustler runs 15 websites, many recently redesigned, and plans to add more sites with exclusive video and photos, says Michael Klein, president of its Broadcasting, Internet and Video Group.
Steven Hirsch, co-chairman of Vivid, one of the world's top adult film producers, predicts DVD sales will largely be replaced by content sold on the Internet. Three years ago, 80% of its revenue came from DVD sales. Now, it's 40%, he says.
"DVDs are dead," says Extreme CEO Rob Black. "The Web is where things are happening." The company is selling video clips on its website before they go to DVD.
New tech unhinges industry
For a $13 billion industry that has been at the cutting edge of tech use, the situation is ironic, says Frederick Lane, a longtime industry observer and author of Obscene Profits: The Entrepreneurs of Pornography in the Cyber Age.
"Even the adult-entertainment industry can be caught by surprise by how fast technology moves," Lane says. "The small- to medium-size companies are getting hammered. "
Pornographers have been among the first to exploit new technology for more than a decade — from video-streaming and fee-based subscriptions to pop-up ads and electronic billing. Their bold experimentation helped make porn one of the most profitable online industries, and their ideas — especially in video-streaming and online subscriptions — have become staples at Fortune 500 companies.
Yet the acceptance of broadband use caught many porn purveyors flat-footed, McApline and others say. Some 62% of adults with Internet access at home had broadband in December vs. 50% in mid-2005, says the Pew Internet & American Life Project.
The market dynamics have hurt several DVD-dependent companies, just as VHS companies went under when DVDs got hot, Lane says.
"Consumers don't have to leave their homes anymore (to get DVDs)," says Bo Kenney, CEO of Sex-Z Pictures, which has 10 retail stores in Virginia. "They can watch whatever they want, whenever, from their PC or TV."
Sex-Z has started producing DVDs, in addition to distributing them, to offset a steep drop in sales. It sold 800,000 DVDs last year, compared with 1.2 million in 2003.
Sales for a hit DVD were 35,000 to 50,000 two years ago. Now, they are about 20,000, Kenney says.
A market opportunity
A spike in Internet-based porn sales the past few years underscores a thirst for adult content on the Internet that has yet to be fulfilled by large adult enterprises, say Lane and others.
Most of the popular mainstream video sites (YouTube, in particular) censor explicit content.
What's more, mainstream companies such as Playboy, Penthouse and Vivid provide a smidgen of free content before "they try to rope you into a subscription," says Eric Wold, managing director of equity research at Merriman Curhan Ford.
Michael Herman, director of business development at Adult Entertainment Broadcast Network — owner of PornoTube.com, a YouTube-like site with user-generated content — says exposure on the Internet is ideal for a company's branding.
PornoTube, started nearly a year ago, generates 10 million to 15 million hits a day — making it one of the 200 most-popular sites on the Web, according to Alexa, which tracks Internet traffic.
Most of PornoTube's user-generated videos are free, but clips are limited to a few minutes. Consumers who want more must pay. PornoTube partners with others to sell subscriptions to paid websites, dating services and video-on-demand.
"It's become an invaluable tool for us to promote business partnerships" with adult studios, Herman says.
And it's a valuable outlet for adult performers. "I can do short clips just for the Internet," says Sunny Lane, an actress in Southern California who owns Sunnylanelive.com. "It's a way to make more money and gain more exposure."
http://www.usatoday.com/tech/techinv...n_N.htm?csp=34
Interesting stuff, especially as the decline figures posted in the article are pretty to similar to the decline in product sale figures ive noted as an affiliate over the past few years.
I wonder if affiliates started to see the decline first, then the stores, then the studios themselves?
I blame PPV/VOD for the death of physical product myself, especially as the decline in sale percentage wise in product, has a direct correlation with the increase in VOD sales for me over the past few years $0.02
Regards,
Lee
